Cash Crops

Editors Note: The following excerpt is adapted from Tree Top: Creating a Fruit Revolution (Pullman: Washington State University Press, 2010) by David H. Stratton. This coffee table book was published to mark Tree Tops 50th anniversary.

In 1951, Life magazine ran a photograph showing a bulldozer shoving tons of discarded apples into a mountainous pile at the Yakima city dump. Pigs rooted around in the mess. The apples consisted of fruit that orchardists had discarded because they failed to meet the grading standards of size, shape, or color that grocery stores required for their fresh apples.

It was by finding an economical way to use those rejected apples, the culls or sortouts, that orchardists paid to have hauled away, that Tree Top Inc., an agricultural cooperative based in Selah, just north of Yakima, grew to be one of the worlds largest processors of apples and pears with 2009 sales of $360 million. The cooperative, which celebrated its 50th anniversary last year, has played a crucial part in helping to maintain the role of apples as the states most valuable agricultural commodity, ranked ahead of milk and wheat.

Tree Tops seven plants use those culled apples to produce apple juice and cider as the backbone of its retail market in 30 states, with core outlets in the West and Southwest. The firm also distributes consumer packaged goods, such as fresh apple slices, blends with other juices and apple sauce. In addition, it sells as bulk ingredients a wide variety of dried and frozen fruit products as well as juice concentrates and purees used by international and domestic food industries. Tree Top managed that most wonderful of miracles: making something out of nothing. That magic has helped the cooperatives 1,062 grower-members receive financial returns from their once-worthless culls.

Weve put a floor under the fresh apple market where none previously existed, said Raymond C. ONeal of Chelan, a former board chair. Tree Top has [also] successfully developed the processing pear, just as it did the processing apple. A Seattle newspaper described the role played by processors like Tree Top as a safety net for the overall industry.

Characteristic of its headquarters location in rural Washington, Tree Top has pitched its major advertising and marketing programs on the basis of time-honored, small-town values familiar across America, taking pride in the warmth and country feel of its business operations and using the slogan: Real Fruit from Real People. Advertisements typically include a homey, personal greeting from the grower-owners who say, For over 50 years, we have held true to our small-town heritage of care, craftsmanship and quality. Those folksy values have resonated well, but the cooperative has been forced to make major adjustments in its strategy to compete in the world of big-city mass marketing, dot-com technology and globalization.

The most serious crisis, which threatened economic ruin for the cooperative, involved the Alar scare of the late 1980s and early 1990s. National media accounts, including two segments on the popular television program 60 Minutes, reported research that Alar, a spray widely used by apple growers, caused cancer. This claim, never proved conclusively by scientific evidence, resulted in a precipitous drop in sales of Tree Top products, and inflicted widespread financial damage throughout the apple industry. Then, beginning in the late 1990s, Chinas practice of dumping its cheap apple concentrate on the international market forced Tree Top to drastically change directions. By the early 2000s, it had implemented a tough, new business model and found new, more profitable markets.

By far the most troubling dilemma Tree Top executives have always faced involved the feast or famine nature of the business with bumper crop years followed by sharp shortages. That made long-term planning virtually impossible. Each year, management had to decide whether to accept all the tonnages of fruit the members wanted to deliver in good crop yearsor to maximize returns by prescribing the tonnages the membership must bring in each year, regardless of harvest yields, thereby stabilizing production costs and marketplace commitments.

In 2008, Tree Top stabilized the business by announcing that the company would negotiate a contract each year that established how many boxes of apples each grower would supply. If additional fruit was needed, the company would purchase it on the cash market, but no foreign products would be used. After nearly 50 years, the cooperative had devised a system that solved the erratic flow of raw material for production.

This pledge against imports meant the company could no longer compete in the market for apple juice concentrate, which was dominated by China. But it enabled the company to launch a distinctive new advertising campaign in which updated labels proclaimed that the product contained 100 percent USA-grown fruit. The firms founding father, William H. Bill Charbonneau, would have heartily approved of this stand. Besides introducing frozen concentrated apple juice in Washington, he had set the high standards for purity and authentic taste that became Tree Tops trademark. Brand loyalty and the USA-grown fruit label helped the company hold onto its customers in the juice market. The company has reinforced that brand loyalty by utilizing blogs, Facebook and Twitter along with online contests and sweepstakes.

Tree Tops market power has proved to be a strategic advantage in recent years as apples have grown to be a crucial industrial ingredient in processed foods like cereals, rapidly outpacing the value of traditional products like apple juice. This business now accounts for about 60 percent of Tree Tops sales and includes sales to Europe, Australia and South America.